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Texas lawmakers spar over electricity market redesign

In a hearing before the Senate’s Natural Resources Committee Monday Texas Public Utility Commission Chairman Donna Nelson took tough questioning on her agency’s authority to restructure the state’s electricity market.

The question of whether to modify the market structure to get power companies building again has become a controversial one in Austin, pitting business interests against power interests in a fight that some believe could amount to billions in additional revenues for the power industry.

Nelson, who is widely seen as a proponent of overhauling the market, defended the move while conceding the decision might not ultimately lie with her agency.

“It’s not a total redesign. A capacity market is still a market, and I still believe in the market,” she testified. “Obviously the legislature determines what our authority is.”

The hearing before the senate committee comes weeks after the PUC announced its intention to mandate the amount of power capacity on the grid. That was widely seen as the first step towards the creation of a so-called capacity market under which plants are paid not just for the power they sell to customers but their total generating capacity.

The move outraged state Sen. Troy Fraser, R-Horseshoe Bay, chairman of the natural resources committee, who called the meeting Monday. During questioning of Nelson, he said the two had met in April and she had assured him she would not support a capacity market.

“You told me it was your intent to back off the capacity market,” he said. “You waited until we were out of session, and then you started the discussion about a capacity market.”

Nelson responded the decision to set a power mandate was the agency “exercising due diligence.”

“You didn’t call the person who’s been in charge of the oversight of this market,” Fraser said. “You didn’t think we’d have concern over a major market design change that would almost certainly entail a capacity market?”

What support there is for derailing a capacity market reorganization remains unclear.

Fraser, who helped usher through deregulation of the electricity market a decade ago, has long been the legislature’s leading voice on power issues. But with utility commissioner Brandy Marty, Gov. Perry’s former chief of staff supporting the move, there is a belief the administration is behind a reorganization.

At the heart of the debate are the questions how much power does Texas need and what are they willing to spend to get it.

ERCOT president Trip Doggett testified Monday that electrical demand had not increased as much as the agency had predicted and his staff was in the process of reevaluating their modeling.

The agency had predicted load growth of 2 to 3 percent in recent years. But demand had grown by less than 1 percent a year, according to an ERCOT report.

At issue was how much consumers were reducing their electrical use on hot summer days in response to increased pricing. From large industrial operations who pay in real time for electricity to residential users signed up for free night and weekend programs, the electricity market is changing, Doggett said.

“There’s a very significant impact in load reduction,” he said.

Follow James Osborne on Twitter at @osborneja.

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